Officials Approve CNX Game Land Lease

Washington PA Observer-Reporter 
27 January 2010

The Pennsylvania Board of Game Commissioners Tuesday approved an oil and gas lease with CNX Gas Co. to acquire oil and gas ownership under a portion of State Game Land No. 179 in Greene County.

The lease contains about 2,175 acres in Aleppo, Jackson and Gilmore townships.

CNX Gas currently owns oil, gas and coal rights on portions of State Game Land No. 179, and also controls oil/gas lease position on private lands adjacent to the state game lands.

In exchange for an oil/gas lease, CNX Gas will convey to the commission a 2,300-acre tract of land known as the Jacksonville property in Young Township, Indiana County.

Upon transfer of this tract of land, the commission will establish a new state game lands complex, State Game Land No. 332. The land has been assessed a value of $1,666,500.

According to the commission, it has negotiated with CNX in an effort to safeguard the development of its oil/gas reserve while protecting the wildlife resources and recreational use of game lands in the county.

The commission has agreed to a seven-year lease with a three-year "drill or drop" clause. CNX also has agreed to pay rental for undeveloped acreage in years four through seven. The commission and CNX Gas have agreed to a tiered royalty ranging from 16 percent to 21 percent, based on the well-head price per 1,000 cubic feet of gas produced and sold from each well.

CNX also will pay the commission a well location or spud fee of $5,000 for each shallow well and $10,000 for each well targeting the Marcellus or deeper formations.

In addition to a surface well or wells, CNX also wants to use surface pipes to transport oil and gas off the state game lands.

Further, CNX will provide 350,000 cubic feet of free gas annually for the agency's use with a payback clause for nonuse.

Oil/gas development will be regulated by the Commonwealth's oil and gas regulations and the agency's standard oil/gas lease agreement and $25,000 performance bond. The lease will include the commission's standard wildlife and protection measures.